Provide a detailed synopsis
Identify and discuss the major issues
Identify and discuss the criminal activity
Identify and discuss the affects of White Collar Crime on the economy and society
National Whistleblower Center
Click on the link below. Once you have accessed the Web site you will find a link on the left-hand side of the homepage called “Meet the Whistleblowers.” Click that link and choose one of the case studies listed there to use for your analysis.
The case study revolves around Bradley Birkenfeld, a former international banker and wealth manager working with UBS AG, a Swiss-based global financial services company. Birkenfled uncovered the largest tax fraud in the US history at the time. The tax fraud involved the UBS Bank flouting the Internal Revenue Service (IRS) standards by operating illegal off shore accounts owned by U.S. citizens (“National Whistleblower Center (NWC),” (n.d). Some U.S. citizens had illegally stashed cash with the UBS bank running into billions of dollars to avoid tax. The case indicates that about 4,900 American taxpayers operated illegal accounts with the UBS bank, total amount being over $5 billion dollars. Birkenfeld, working with the UBS Bank, revealed the illegal off shore accounts marking a major milestone for the United States in the fight against tax evasion. These revelations forced the Swiss government to review its tax accord with the U.S. government.
There are various key issues highlighted in this case study. One of the key issues is tax evasion. The case study highlights the specific ways in which dishonest U.S. citizens stashed money abroad to avoid paying taxes. The UBS bank kept this information confidential until Birkenfeld revealed the secret off shore accounts. This disclosure was crucial considering that the U.S. government was losing a lot on taxes through secret off shore accounts. In total, over $19.5 billion dollars of taxpayer’s money was recovered following the disclosure (“NWC”, n.d).
Another key issue evident in the case study is retaliation. Whistleblowers face the risk of retaliation from those perpetrating the offenses. More often, whistleblowers disclose acts perpetrated by those in the top leadership. This attracts retaliatory action against the whistleblowers. It is important that appropriate mechanisms for whistleblower protection be put in place to encourage whistleblowers to come forward. Most individuals fear to report incidences of fraud involving the senior management due to feat of retaliatory action. The more assurance that these individuals receive the higher the chances that they will report suspected cases of fraud. The government should ensure whistleblower protection is made a priority since whistleblowers may experience harassment to the point of retracting their statements.
Another major issue covered in the case study is whistleblower reward (“NWC,” n.d). This reward encourages individuals to come forward and report incidences of fraud occurring in their place of work. A reward can also help in compensating those who receive retaliatory action due to their action to disclose fraud. For instance, most of whistleblowers are more likely to experience job loss or they may quit due to harassment from the superiors or other employees. Another key issue relates to fines and penalties. Those implicated in the whistleblowing are likely to face charges once proven guilty of the allegations. The civil fines and penalties serve to deter similar action in future by others. The penalty may also involve returning the ill-obtained wealth. The government may develop policies to prevent a similar kind of fraud from occurring in future. For instance, the Swiss government enacted a new policy government the tax treaty with the United States following this disclosure.
Identify and discuss the criminal activity
The criminal activity involved in the case study is offshoring money for tax evasion. This entailed stashing money in foreign bank accounts to avoid paying taxes in the U.S. The tax fraud happened under the watch of UBS bank. Although offshoring a bank account is not illegal, individuals may take advantage of the process to evade paying taxes (Kohn, 2014). In ordinary circumstances, investors may use the services of foreign banks to conduct transactions. The World Trade Organization (WTO) and the Organization for Economic Cooperation and Development (OECD) regulate transactions involving foreign banks (Kohn, 2014). These organizations have developed a policy framework that guides transactions involving foreign banks. The rules require banks to provide reports about accounts held by foreign customers to their respective countries. This information is important because it helps the government in determining the amount of taxes each account holder should pay.
The UBS bank in Switzerland operated under strict privacy laws at the time. This means that the bank did not disclose information concerning foreign bank accounts as required by the WTO and OECD (Kohn, 2014). Failure to provide information about foreign bank accounts created a loophole that businesspersons and investors could exploit to evade taxes. Following the disclosure, Switzerland had to amend the existing laws to avoid breaking ties with the U.S. government. Offshoring is costly to the investors’ country since it denies the government tax revenue worth billions of dollars. The government could invest this revenue in various projects to improve the well-being of the people. During offshoring, individuals may make use of small or little known companies with few assets to hide real ownership. This helps them to avoid detection by authorities and hence their tax obligations.
Effects of white collar crime on the economy and society
White collar crime has significant impacts on the economy and the society at large. White collar crime is widespread and has high cost implications on the economy and society. White collar crime causes loss of jobs to employees (Graham, 2012). When white collar crime leads to closure of business organizations and hence job loss to thousands of employees depending on the organization affected either directly or indirectly. This increases unemployment levels in the economy. Another impact is the loss of investments, which mainly affects investors Graham, M. (2012). When white collar crime occurs, investors are at a high risk of losing the amount of money invested in the companies affected. This has negative impacts on the economy and may erode investor confidence. White collar crime leads to suffering among consumers. White collar crime may lead to bankruptcy and disruption of service delivery or availability of key goods to the consumers. This may cause anguish and frustration among consumers.
White collar crime leads to lengthy litigation that is also expensive. Most of the white collar crime leads to litigation which may take up to three years before a ruling is made. This is a huge drain on resources. For instance in Birkenfeld’s case study, the litigation took three years before the court passed judgment. White collar crime can lead to price increases. This can occur when the production of an important good or service delivery is affected. This may create a shortage leading to an increase in prices. Lastly, there is the direct cost of the crime or fraud itself.
Graham, M. (2012). White collar crime and the United States’ economy. Retrieved from http://scholars.unh.edu/cgi/viewcontent.cgi?article=1048&context=honors
Kohn, S. M. (2014). Whistleblower disclosure triggers “global tax transparency”. Retrieved from http://www.whistleblowersblog.com/2014/10/whistleblower-disclosure-triggers-global- tax-transparency/
National Whistleblower Center (NWC). (n.d). Bradley Birkenfeld. Retrieved from http://www.whistleblowers.org/meet-the-whistleblowers/934-bradley-birkenfeld